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Pound Rises, but Experts Warn Upside Limited Ahead of Powell Testimony

By Yasin Ebrahim

Investing.com – The pound climbed against the dollar on Monday, but some experts warned further gains will likely be kept in check by ongoing UK-EU trade tensions and steady U.S. interest rates.

Market participants should position themselves for a weaker sterling versus the dollar, due to "the likelihood of reduced market expectations for U.S. interest-rate cuts and growing UK-EU trade tensions, RBC said in note.

GBP/USD rose 0.21% to $1.2918.

Cable's advance, however, could come under pressure as soon as Tuesday, should Federal Reserve Chairman Jerome Powell deliver a positive assessment of the U.S. economy in his semiannual testimony before Congress, RBC said.

The 40-basis-point Federal Reserve rate cuts currently priced in by the market this year "seems excessive" and a "repricing should support continued USD outperformance," RBC added.

The U.S. dollar index, which measures the green against a trade-weighted basket of six major currencies, rose by 0.16% to 98.76.

The dollar traded flat against safe-haven currencies as the coronavirus death toll rose to 909, with the number of those infected rising above 40,000.

USD/JPY was unchanged at Y109.68 and USD/CHF fell 0.09% to 0.9769.

EUR/USD fell 0.27% to $1.094, with some warning the coronavirus poses a bigger risk to the economy of Germany, the EU's growth engine, than that of the U.S.

"The coronavirus and its impact on the global supply chains is seen as a much bigger issue for Germany than for the U.S., thus EUR/USD is under pressure," ING said.

USD/CAD gained 0.10% to C$1.3225, as falling oil prices continued to weigh on the loonie.

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